MultiClient (Shared) Warehousing

The Key Advantages of Using Public Warehousing

Flexibility - Since the birth of the industry over a decade ago, flexibility of resources - such as space, labor, and equipment - has been one of the primary advantages of public warehousing. With the current trend toward reducing inventories, there is a constant demand for variable space, labor, and equipment required to support the business during peak season or large growth cycles. Given adequate lead-time, public warehouses are able to offer manufacturers total flexibility to either increase or decrease their space, equipment, and human resources requirements.

Transportation Consolidation - Manufacturers who consolidate their materials and merchandise in a public warehouse are able to realize significant cost savings due to the high percentage of total distribution or logistics costs associated with transportation. As manufacturers strive to receive their raw materials, parts or components on a just-in-time basis, they are turning to public warehouses for consolidation of inbound materials destined for points of production. Specifically, companies are developing programs with public warehouses that are in close proximity to their point of manufacturing. This way, the warehouses receive larger shipments from vendors in order to make smaller shipments containing one or more components on a JIT basis. In fact, this relatively new focus has gotten to the point where the public warehouse operator will actually conduct a quality test of the components and perform assembly operations of multiple components prior to delivery.

Variable Cost of Operations - Companies generally use one of two strategies when it comes to acquiring assets for their distribution center operations. One strategy is to obtain sufficient resources to meet peak levels of business. This strategy leads to overspending as the company has high fixed costs in the form of space, equipment, and racking that is underutilized when it is not operating at peak levels of business.

The second strategy is to acquire enough assets to support low levels of business activity and then supplement these resources with more expensive or premium resources in the form of short-term leases of space & equipment and temporary labor or overtime. In each of these cases, the resources not only cost more per unit, but also create excess cost due to compromised levels of quality and waste.

The savings created by public warehousing, not only pays for the resources that are available when the manufacturer needs them, but are purchased at a lower rate per unit, and waste in the form of lower levels of quality is minimized.

Capital Preservation - By using a public warehouse, a company does not have to use its capital to acquire and operate a distribution center such as buildings, systems, or equipment. Instead, this capital can be freed up and redirected to areas that make a higher contribution to increasing profits such as research & development, marketing, or employee education, among others.

Channel Customization - Manufacturers today expect and demand that their product be delivered exactly when, where, and in the configuration they desire. Few, if any suppliers, have a single distribution network that can effectively accommodate the diversity of requirements represented by their various customer groups. At the same time, they find it difficult, if not impossible, to justify constructing and supporting several different networks. In response to this challenge, manufacturers are applying a strategy of using a mix of company operated and public warehouses. For example, a company may chose to ship all full truckload of orders direct from a network of company operated plant/DC locations. Consolidated, less-than-truckload orders for customers who are satisfied with longer cycle times move through a second network of public warehouses who offer cross-docking services. And a third network of regional operators carry products full time to support manufacturers whose customers require a quicker response of frequently ordered small or less-than-truckload quantities.

Market Knowledge - Regional public warehouse operators - that are owned and operated by entrepreneurs who have been in the business for generations -- provide a unique value and make a significant contribution to the smooth execution of a company's supply chain strategy. This is simply due to their intimate knowledge of how to get things done in their market and the rock solid relationships they have developed over the years.

Postponement - As customers demand more and more value-added services public warehouses are offering final assembly, labeling, testing, configuration of products and many others. This allows companies to maintain product in a generic form until they know the exact product and quantity required by their customer.

Agility - To successfully and quickly enter and exit markets, public warehouses offer the best solution to achieve superior logistics agility by eliminating the need to: (1) build or lease facilities, (2) hire and train staff, (3) secure equipment, (4) become knowledgeable concerning regional regulations applicable to the storage or transportation of a company's product.

Customer Intimacy and Intelligence - Give the fact that demand for quick response and compressed cycle times has no end in sight, more and more companies are using public warehousing as a relatively inexpensive and low risk means to get physically closer to their customers. And since a majority of public warehouses are privately owned and operated by people who live and work in the area, they can often attain a level of customer contact that is near impossible for any company who is located in another region. An invaluable benefit of this is the customer intimacy and resulting intelligence on how your company is perceived by your customers, along with a more complete understanding of their exact requirements.

Focus - Providing logistical services is all public warehouses do! As a result, they devote all of their resources to being excellent at the basics, continuously improving processes, providing on-going training, investing in equipment advancements, and developing or acquiring leading edge hardware/software systems. By having this focus, manufacturers are freed up to concentrate on their core competency such as marketing, R&D, or manufacturing and know that the public warehouse will be in a position to support and actually help them grow their business.

Human Resources Management - Virtually every business lists the hiring and retention of quality labor as one of their most critical challenges. Since public warehouses are in the service business and human resources is a key ingredient to providing quality services, they must develop a core competency in human resource management.

In other words, the public warehouse is not just providing the traditional resources of space, equipment, or systems they are also offering value by effectively hiring, training, retaining, and motivating quality labor.

Leading Edge IT - The primary concern of public warehouses is logistics and the integration among supply chain partners, so they regularly allocate more resources to IT development and frequently have more sophisticated or leading edge information technology capabilities than corporations whose core competency is not distribution. As a result, unless a manufacturer has devoted an unusually high amount of resources to IT, they will find that one of the benefits of using a public warehouse is the availability of leading edge IT.

Expertise - Most manufacturers recognize that public warehouse operator's wide exposure to manufacturers' issues and their corresponding solutions enables them to develop a unique and valuable experience base. As a result of their breath and depth of experience, they can provide a tremendous value to manufacturers as a resource of knowledge and creative solutions.

Control - One of the most overlooked benefits of using public warehousing is added control over your product and level of service provided. Contrary to popular belief, a properly managed relationship can give the manufacturer even more control than if they used a company operated facility. Essentially, a public warehouse becomes the manufacturer's product bank. Deposits and withdrawals are directed by the manufacturer and it's the responsibility of the warehouse to ensure and guarantee its accuracy.

Purchasing Power - Since public warehouses are supporting the needs of a number of manufacturers, they often purchase larger quantities of resources. By purchasing in bulk, public warehousing can often times reduce the total cost of resources required to support a company's distribution system.